Nancy Silverman and Estate of Sheldon Silverman, Deceased, Nancy Silverman, Executrix - Page 1

                                    T.C. Memo. 1996-69                                       

                                 UNITED STATES TAX COURT                                     

                    NANCY SILVERMAN AND ESTATE OF SHELDON SILVERMAN,                         
                  DECEASED, NANCY SILVERMAN, EXECUTRIX, Petitioners v.                       
                      COMMISSIONER OF INTERNAL REVENUE, Respondent                           

                Docket No. 20324-89.             Filed February 20, 1996.                    

                     H invested $100,000 in an arrangement, as a result of                   
                which a $1,600,000 Schedule C deduction was claimed on the                   
                1981 tax return.  W did not see or sign this tax return, but                 
                the parties agree that it was a joint tax return.  As a                      
                result of H's income tax withholding and excess F.I.C.A.                     
                withholding, H's and W's 1981 joint tax return reported                      
                payments of $128,733, all of which was claimed as a refund.                  
                In September 1982 respondent (R) refunded $74,360.39 plus                    
                interest by check, which H deposited in one of his                           
                individual checking accounts, and quickly spent.  At the                     
                same time, R transferred the remaining $54,372.61 of 1981                    
                payments to H's and W's 1980 tax liability account, leaving                  
                a zero balance in the 1980 tax liability account.  H died in                 
                1986, and his estate was insolvent.  Later in 1986, W filed                  
                claims for refund of 1979, 1980, and 1981 taxes, on account                  
                of net operating loss carrybacks from 1982.  (A similar                      
                $1,600,000 Schedule C deduction had been taken on H's and                    

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